Gunasekaran, A. and Ngai E. W. T. and T. C. E. Cheng (2007), “Developing an E-logistics System: A case study”, International Journal of Logistics: Research & Applications. Vol. 10, No. 4, pp. 333 - 349. FINAL October 30, 2006 Developing an E-Logistics System: A Case Study Angappa Gunasekaran * Department of Management, University of Massachusetts - Dartmouth North Dartmouth, MA 02747-2300, USA Eric W. T. Ngai Department of Management and Marketing, The Hong Kong Polytechnic University Hung Hom, Kowloon, Hong Kong, China T. C. Edwin Cheng Department of Logistics, The Hong Kong Polytechnic University Hung Hom, Kowloon, Hong Kong, China Abstract Third-party logistics (3PL), a relatively new industry, has gained momentum since the emergence of global market and the Internet, in particular Electronic Commerce (E-Commerce). Global competitiveness places more pressure on companies to improve their delivery performance of products and services to customers. In an effort to improve the quality of delivery service, companies have outsourced their logistics services including packing, warehousing (inventory management) and shipping of goods to customers. Communication plays an important role in integrating the activities along the logistics value chain. Information technologies such as Electronic Data Interchange (EDI), the Internet, World Wide Web (WWW) and E-Commerce have contributed greatly to improving communication with partners in the logistics chain. In particular, real-time information systems such as web-based logistics information systems help to improve 3PL services. In this paper, a case study of E-Logistics is used to illustrate the implications of Information Technology (IT) in particular the Internet, WWW and EDI on the performance of the logistics value chain is presented. A framework based on the literature survey and case study is proposed to help companies develop an E-Logistics system to improve their competitiveness. Keywords: E-Logistics, Framework, Case Study. ______________________________________________________________________________________ *Corresponding author - Tel: (508) 999-9187; Fax: (508) 999-8646; E-mail: [email protected]Acknowledgments: The authors are grateful to anonymous reviewers and the Editor-In-Chief, Professor Kulwant Singh Pawar for their constructive and helpful comments on the earlier version of this manuscript, which helped to improve the presentation of the paper considerably. The authors are most grateful to the
30
Embed
Developing an E-Logistics System: A Case Studyira.lib.polyu.edu.hk/bitstream/10397/1150/1/IJoL#229...of logistics achieving competitive advantage through in Information System (IS).
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Gunasekaran, A. and Ngai E. W. T. and T. C. E. Cheng (2007), “Developing an E-logistics System: A case study”, International Journal of Logistics: Research & Applications. Vol. 10, No. 4, pp. 333 - 349.
FINAL October 30, 2006
Developing an E-Logistics System: A Case Study
Angappa Gunasekaran*
Department of Management, University of Massachusetts - Dartmouth North Dartmouth, MA 02747-2300, USA
Eric W. T. Ngai
Department of Management and Marketing, The Hong Kong Polytechnic University Hung Hom, Kowloon, Hong Kong, China
T. C. Edwin Cheng
Department of Logistics, The Hong Kong Polytechnic University Hung Hom, Kowloon, Hong Kong, China
Abstract
Third-party logistics (3PL), a relatively new industry, has gained momentum since the emergence of global market and the Internet, in particular Electronic Commerce (E-Commerce). Global competitiveness places more pressure on companies to improve their delivery performance of products and services to customers. In an effort to improve the quality of delivery service, companies have outsourced their logistics services including packing, warehousing (inventory management) and shipping of goods to customers. Communication plays an important role in integrating the activities along the logistics value chain. Information technologies such as Electronic Data Interchange (EDI), the Internet, World Wide Web (WWW) and E-Commerce have contributed greatly to improving communication with partners in the logistics chain. In particular, real-time information systems such as web-based logistics information systems help to improve 3PL services. In this paper, a case study of E-Logistics is used to illustrate the implications of Information Technology (IT) in particular the Internet, WWW and EDI on the performance of the logistics value chain is presented. A framework based on the literature survey and case study is proposed to help companies develop an E-Logistics system to improve their competitiveness. Keywords: E-Logistics, Framework, Case Study.
*Corresponding author - Tel: (508) 999-9187; Fax: (508) 999-8646; E-mail: [email protected] Acknowledgments: The authors are grateful to anonymous reviewers and the Editor-In-Chief, Professor Kulwant Singh Pawar for their constructive and helpful comments on the earlier version of this manuscript, which helped to improve the presentation of the paper considerably. The authors are most grateful to the
This is the Pre-Published Version.
2
Chief Operating Officer, Mr. Edmon Fung, and the Managing Director, Mr. Johnny Leung, and several senior managers of ecL for providing the necessary information for this case study research. This research was supported in part by the University of Massachusetts – Dartmouth (USA) and The Hong Kong Polytechnic University under grant number A632.
3
1. Introduction In today’s highly competitive environment, many companies are entering the global arena
to gain market share and take advantage of higher production and sourcing efficiencies.
E-Commerce has brought new challenges, as well as opportunities to logistics
management. The cost of logistics and transportation has a large impact on a company’s
profitability. A global market, outsourcing, and operations place tremendous pressure on
the logistics function to deliver the goods as quickly as possible at the lowest cost
(Gunasekaran and Ngai, 2004a). Therefore, a key determinant of business performance is
the role of the logistics function in ensuring the smooth flow of materials, products and
information throughout a company’s supply chain (Sum et al., 2001). More recently,
logistics has become more prominent and is recognized as a critical factor in competitive
advantage due to the nature of a physically distributed operations environment and global
markets.
Logistics can be defined as an operational process that includes inputting, storing,
transporting and distributing physical goods (Stratton, 2001). E-Logistics is an Internet-
enabled logistics value chain designed to offer competitive logistics services including
public warehousing, contract warehousing, transportation management, distribution
management, freight consolidation (Gunasekaran and Ngai, 2003; Hesse, 2002). Over the
years, logistics has developed from single party logistics (self-managed) to Third-party
logistics (3PL) using a logistics network. 3PL is contractual logistics focusing on regional
operations. The main objectives of outsourcing logistics services are to: (a) reduce
operating costs, (b) meet demand fluctuations, and (c) reduce capital investment1
1
(Chiu,
1995; Calza and Passaro, 1997; Hess, 2002; Gunasekaran and Ngai, 2400b). The general
problems that arise in corporate logistics include delayed and inaccurate information,
incomplete services, slow and inefficient operations, and high product damage rates. This
indicates the importance of accurate information exchange among different parties along
the logistics value chain. Under such circumstances, the role of information technologies
including the Internet, World Wide Web (WWW) and Electronic Data Interchange (EDI)
strength, service capabilities, value adding, and sales and marketing strategies.
Nevertheless, the application of IT/IS should be considered while developing
partnerships, not only simply looking at the final services to be offered to customers or
clients (such as timely delivery of goods), but also examining their organizational
infrastructure, including IT/IS and skills available such as the Internet, E-Commerce,
WWW and EDI, and availability/presence of knowledge workers. Without considering
these factors, there will be a lack of integration between suppliers along the logistics
value chain. From these perspectives, the companies that ecL selected as partners must be
on the Web and have the necessary expertise in E-Logistics services.
4.3.3 Information Systems
18
ecL uses an inventory cycle count system. Their transportation operations are well
integrated with their web-based information system. They have not received any
government support, which seems to call into question the traditional view. However,
they have received support from their clients who are seeking entry into the Greater
China market. The cost of warehousing and labor is very high in Hong Kong, which is
why ecL chose to have its warehousing operations in China and Taiwan.
ecL barcodes all items. They have a main bulk storage area for heavy items and a detailed
picking area for loose items. There is also an area to store fast-moving items. In the
warehouses, ecL has web-based cameras that allow its customers to physically view their
stock online. ecL uses the IBM AS/400 hardware technology, iadvantage, for its data
centers. It has one of the largest data centre networks in the region and has its own
vehicle fleet for Hong Kong deliveries, but uses FedEx for overseas deliveries. This
demonstrates the role of IT/IS in making a small company like ecL a big player in
logistics operations along the line of virtual logistics.
Formerly, ecL used to have two to three weeks’ worth of safety stock. Since the
implementation of a B2B logistics information system, they have reduced the safety stock
level to just two days. This represents a dramatic improvement in performance. Financial
transactions have also become much easier and more secure. ecL has very good cash flow
at this stage. Also, their partners are on the Web, helping to improve integration with
their partnering firms. Since the consolidation of goods is done in real-time, this helps to
reduce duplication of effort.
The capabilities of ecL for managing customer demand and business development are
presented in Tables 1 and 2. Table 1 presents a list of successful strategies/technologies
adopted by ecL to effectively meet the demand of customers. For example, ecL has used
a web-based monitoring platform for real-time visibility of customer products. In order to
improve its flexibility and responsiveness, the company has many stock-keeping units
(SKUs), and distributes goods in small quantities with many deliveries using 3PL
management. Also, KPIs such as time to deliver the products, number of orders fulfilled
19
on time, provision of faultless invoices, cost of distribution, etc have been used for
transaction-based costing, which have ultimately led ecL to being able to provide high
quality logistics services at competitive prices. Table 2 indicates how ecL was able to
develop their business more effectively. For example, through the web-based
platform/Warehouse Management Systems, ecL was able to understand thoroughly the
customer’s core business. Also, ecL has developed a call centre with CRM to improve its
relationship with customers. ecL has invested in providing comprehensive professional
education and training to develop knowledge in e-commerce on the part of its staff.
________________________________
Insert Tables 1 and 2 about here ________________________________
The ecL Web platform has resulted in the following advantages: (a) provides real-time
inventory information, (b) provides real-time order status checking, (c) single data entry
to minimize human error – the data input is handled by the customers themselves with no
need for re-entry by ecL, (d) offers multi-level password control (ADMIN-order approval;
ORDER – order placement and online enquiry; ENQUIRY- online enquiry only), and (e)
provides real-time inventory information. Through a Web browser, users can retrieve
historical order data easily and efficiently. 4.3.4 Inventory Management At their warehouses, ecL classifies the items into ABC items such as high, medium and
low turnover products, so that critical items can receive due attention. Also, from the
human resources point of view, people have problems with understanding the complex
information system. That is why ecL decided to go for a simple and effective web-based
real-time information system for their logistics operations. The online real-time inventory
control system allows customers to control stock directly via the Internet. Updated stock
information and delivery information is easily available in the system.
The company believes in an information system that is easy to use and develop. They are
in the process of migrating to mobile commerce using Palm for electronic signatures to
reduce delays in delivering goods. There are 20 stages in their logistics operations and all
20
of these stages are integrated. They are looking into developing 5PL (which is multi-party
logistics using logistics networks) in China. They evaluate their operations performance
by computing the value and amount of goods in transit and not in the warehouse. ecL has
KPIs in place for monitoring the performance of their operations and their overall
performance in various areas of their logistic operations. They have been able to improve
their overall financial performance by 17% with the help of their real-time information
system.
5. Summary of Findings and Conclusions In this paper, a conceptual framework for E-Logistics was first developed on the basis of
a literature survey and some reported case experiences. The case study concluded at “The
framework distinguishes the necessary dimensions that a logistics company must have to
offer an integrated, online service for its customers”. The main objectives of this research
were to: (i) understand the current and emerging issues of logistics operations and their
role in organizational competitiveness (ii) develop a conceptual model for E-Logistics,
(iii) study the model with reference to an emerging E-Logistics company, i.e., the case
company in Hong Kong, and (iv) summarize the overall findings.
Based on the case study and its results, the following were seen as critical success factors
for E-Logistics: (1) application of a real-time logistics information system to improve
communication along the logistics value chain, (2) a web-based inventory control and
ordering system, (3) supporting SMEs to develop their business (strategic alliances), (4)
vouching customers, (5) location of the company, (6) development of relationships with
large-scale logistics companies, such as DHL, FedEx and UPS, (7) focusing on the
customer-base, (8) networking and relationship management, (9) having a B2B2C E-
Commerce system for 3PL, (10) receiving good capital support from partners, (11)
blending expertise in IT and industry, (12) business partnering, (13) understanding
customers, and (14) government initiatives. The theoretical and practical implications of
our findings are discussed below.
21
5.1 Theoretical Implications The framework presented in this paper opens up many avenues for further research to
study the conceptual framework with more empirical evidence such as a questionnaire-
based mail survey with logistics companies. Although we proposed a variety of IT/IS for
developing E-Logistics, a model needs to be developed based on this logistics paradigm
to identify the right technologies given the organizational strategic goals and
infrastructure available. There are many issues which should be addressed with
appropriate analytical models for optimizing the logistics system configuration given the
implications of web-based logistics information systems. Strategic planning has been
considered as very important in managing any system including E-Logistics. However,
this poses a great challenge for selecting the optimal strategic choices taking into account
the corporate objectives/goals. Partnership formation is not a new approach, but E-
Logistics requires a different set of criteria in selecting the partners including the
geographical location of the company, technological infrastructure and expertise
available as well the organizational choice of logistics productivity and competitive
performance objectives. The next major theoretical implications come from the
application of existing models for managing inventory in E-Logistics environments. Now
the important question that needs to be addressed in E-Logistics inventory management is
what the decision variables, parameters and optimization criteria are. E-Logistics
architecture will vary from company to company based on the nature of their business
and strategic goals. This offers opportunities to develop a framework for determining an
optimal architecture for E-Logistics system.
5.2 Practical Implications
ecL aims to provide a one-stop service for total E-Logistics services, linking global
merchants and direct marketers to their customers. As noted earlier, the main reasons for
outsourcing are: (1) to reduce operating costs and (2) to meet fluctuations in demand.
Companies in the new economy are focusing on core strengths, providing real-time
information, globalizing service demand, visibility in KPIs, collaboration in supply chain
operations, and e-commerce development. It is also important to have partners with a
22
clear understanding of the local market environment. Credibility and reputation are two
key criteria that E-Logistics services firms aim for when selecting partners. Adherence to
timeliness and thoroughness in performance is just as important.
E-Logistics poses numerous managerial challenges in terms of establishing strategic
alliances based on core-competencies while developing a logistics value chain. Moreover,
how the logistics component of the value chain can be integrated with the rest of the
supply chain needs to be addressed so that an integrated business process can be achieved.
The behavior and role of logistics managers will be different in E-Logistics from those of
traditional logistics systems which are based on centralized resources. E-Logistics is
based on an IT/IS integrated 3PL system, so the manager’s function in E-Logistics will
be more of knowledge management involving close control over the strategic operations
of 3PL and leveraging the application of web-based logistics information systems.
Now managers of E-Logistics face the question of what the suitable performance
measures and metrics are that need to be used in controlling the operations of their
system with the objective of providing reliable and fast services to global customers.
Enterprise resource planning systems have their own modules to manage logistics
functions and in that case, how the managers will interact to reach more informed
decisions which will effectively contribute to providing world-class logistics services
should be studied. Furthermore, the type of education and training required to operate in
an E-Logistics environment should also be investigated so that the right skills can be
made available for managing E-Logistics systems productively. Incentive schemes need
to be developed so that appropriate scales can be used to evaluate managers for their
contribution in providing quality logistics services in E-Logistics environments. Data
mining and warehousing require the certain of data which need to be collected and stored
in E-Logistics in specified formats. Some key performance indicators may be helpful.
In summary, successful 3PL management is vital for competing regionally and globally
as IT/IS provides the information linking the different logistical functions throughout the
logistics value chain. We see IT/IS as an enabler in logistics management to get the right
products to the right place in the right quantity at the right time, and to provide quality
23
services to satisfy the customer’s needs. There is no doubt that E-Commerce is the
catalyst across the supply chain network. From our literature review and case analysis, it
is clear E-Commerce has an enormous impact on the performance of a logistics system. It
changes and redefines some traditional roles in a logistics system from cargo ordering,
invoicing, to global cargo tracking, monitoring, etc.
E-Logistics will grow exponentially in the future and this development will drastically
affect pricing and charging schemes in the industry. The overarching critical success
factor of the logistics industry under the new economy is establishing an information-
based supply chain that improves continuously and provides flexibility and
responsiveness to changing customer requirements. We see IT applications like the
Internet, WWW, and E-commerce as a major source of logistics productivity.
References
1. Aldin, N. and Stahre, F., 2003, “Electronic commerce, marketing channels and logistics platforms – a wholesaler perspective”, European Journal of Operational Research, Vol. 144, pp. 270-279.
2. Alshawi, S., 2001, “Logistics in the Internet age: towards a holistic information
and processes picture”, Logistics Information Management, Vol. 14, No. 4, pp. 235-241.
3. Calza, F. and Passaro, R., 1997, “EDI network and logistics management at
Unilver-Sagit”, Supply Chain Management, Vol. 2, No. 4, pp. 158-170.
4. Chiu, H. N., 1995, “The integrated logistics management system: a framework and case study”, International Journal of Physical Distribution and Logistics Management, Vol. 25, No. 6, pp. 4-22.
5. Gudmundsson, S.V. and Walczuck, R., 1999, “The development of electronic
markets in logistics”, The International Journal of Logistics Management, Vol. 10, No. 2, pp. 99-113.
6. Clarke, M. P., 1998, “Virtual logistics: An Introduction and overview of the
concepts”, International Journal of Physical Distribution and Logistics Management, Vol. 28, No. 7, pp. 486-507.
7. Damsgaard, J., 1999, “Global logistics system Asia Co., Ltd”, Journal of
Information Technology, Vol. 14, pp. 303-314.
24
8. Dawe, R. L., 1994, “An investigation of the pace and determination of information technology use in the manufacturing materials logistics system: a case study of Northern California’s electronic manufacturers”, Journal of Business Logistics, Vol. 15, No. 1, pp. 229 – 259.
9. Delfman, W., Albers, S. and Gehring, M., 2002, “The impact of electronic
commerce on logistics service providers”, International Journal of Physical Distribution and Logistics, Vol. 32, No. 3, pp. 203-222,
10. Feraud, G. J. S., 1998, “Improving strategic decision making in logistics
information management – a framework”, Logistics Information Management, Vol. 11, No. 4, pp. 232-243.
11. Gibson, B. J and Cook, R. L., 2001, “Hiring practices in US third-party logistics
firms”, International Journal of Physical Distribution and Logistics Management, Vol. 31, No. 10, pp. 714-732.
12. Graham, G. and Hardaker, G., 2000, “Supply chain management across the
Internet”, International Journal of Physical Distribution and Logistics Management, Vol. 30, Nos. 3/4, pp. 286-295.
13. Gunasekaran, A. and Ngai, E.W.T., 2003, “The successful management of a small
logistics company”, International Journal of Physical Distribution & Logistics Management, Vol. 33, Nos. 9/10, pp. 825-837.
14. Gunasekaran, A. and Ngai, E.W.T., 2004a, “Virtual supply chain management”,
Production Planning and Control, Vol. 15, No. 6, pp. 582-596.
15. Gunasekaran, A. and Ngai, E.W.T., 2004b, “3PL: Experiences from China Resources Logistics (Hong Kong)”, International Journal of Logistics Systems and Management, Vol. 1, No. 1, pp. 81-111.
16. Hesse, M., 2002, “Shipping news: the implications of electronic commerce for
logistics and freight transport”, Resources, Conservation and Recycling, Vol. 36, pp. 211-240.
17. Leung, L. C., Cheung, W. M. and Van Hui, Y., 2000, “A framework for a
logistics e-commerce community network: The Hong Kong air cargo industry”, IEEE Transactions on Systems Man and Cybernetics Part – A Systems and Humans, Vol. 30, No. 4, pp. 446-455.
18. Liao, Z. Q. and Cheung, M. T., 2001, “Internet-based e-shopping and consumer
attitudes: an empirical study”, Information and Management, Vol. 38, No. 5, pp. 299-306.
25
19. Ligon, G. C., Schill, R. L. and O’Donnel, P. F., 1992, “Technology strategy: EDI and global air express”, International Journal of Physical Distribution and Logistics Management, Vol. 22, No. 8, pp. 43-48.
20. Martinsons, M. G., 2002, “Electronic commerce in China: emerging success
stories”, Information and Management, Vol. 39, No. 7, pp. 571-579.
21. McFarlan, F. W., 1984, “Information technology changing the way you compete”, Harvard Business Review, Vol. 57, No. 2, pp. 115-126.
22. Ngai, E. W. T. and Wat, F. K. T., 2002, “A literature review and classification of
electronic commerce research”, Information and Management, Vol. 39, No. 5, pp. 415-429.
23. Rao, K., Young, R. R. and Novick, J. A., 1993, “Third-Party services in the
logistics in the logistics of global firms”, Logistics and Transportation Review, Vol. 29, No. 4, pp. 363-370.
24. Schary, P. B. and Coakley, J., 1991, “Logistics organization and the information
system”, The International Journal of Logistics Management, Vol.2, No. 2, pp.22 – 29.
25. Strader, T. J., Lin, F.-R. and Shaw, M. J., 1998, “Information infrastructure for
electronic virtual organization management”, Decision Support Systems, Vol. 25, pp. 75-94.
27. Sum, C. C. and Teo, C. B. and Ng., K. K., 2001, “Strategic logistics management in Singapore”, International Journal of Operations and Production Management, Vol. 21, No. 9, pp. 1239-1260.
28. Tarantilis, C. D. and Kiranoudis, C. T., 2002, “Using a spatial decision support
system for solving the vehicle routing problem”, Information and Management, Vol. 39, No. 5, pp. 359-375.
29. van Hoek, R. I., 2001, “Epilogue: UPS Logistics – Practical approaches to the e-
supply chain”, International Journal of Physical Distribution and Logistics, Vol. 31, No. 6, pp. 463-468.
26
E-Logistics
Automation in Warehousing Operations
Information Management
Transportation
Network
One-Stop Value-added
Services
Figure 1: A Conceptual Framework for E-Logistics
27
E-Logistics
Strategic alliances with suppliers, Networking and relationship management, Focus on customer-base, Location of the company
Real-time logistics
information, web-assisted inventory control, ABC
Classification, JIT
Supporting SMEs, Vouching customers, Relationship with DHL, FedEx, UPS, Capital
support from Sellers, Trucking companies, Government support
Real-time information system, Global positioning
system, Web-based inventory and order control systems,
B2B2C e-commerce, blend IT and industry expertise
Strategic Planning
Information Technology
Inventory Management
Partnership Formation
Figure 2: A Framework for the Development of E-Logistics
28
Table 1: ecL Capabilities to meet Customer Demand in 3PL
Customer Demand
ecL Capabilities
Real-time visibility
Web-based monitoring platform
Many SKUs, Small Quantity Orders with many
deliveries
3PL management
Transaction-based costing
KPI handling
Flexible charging scheme
Charge based on online ordering and per item
Table 2: ecL Capabilities for Business Development in 3PL
Business Development
ecL Capabilities
Thorough understanding of customer’s core
business
Web-based platform/Warehouse Management
System
Globalized development
Web-linked regional distribution centers
Customer Relationship Management
Call centre with CRM capabilities
Staff Knowledge of E-Commerce
Providing comprehensive professional training
29
Appendix I: Semi- Structured Questionnaire for the Case Study
General Information about the Company Section 1: Strategic Planning What are your company’s objectives and mission? Who are your customers? (Global Operations!) What are value-adding activities are performed? How do you deal with reverse logistics? What are you future strategies and plans to expand your business? How do you evaluate your own performance? (Performance measures) What you think is the most challenging in today's logistics operations? What is your future strategic planning? What are the factors that contributed to your success in logistics business? What is the focus of your logistics services? Section 2: Partnership Formation Who are your partners? (What criteria you use to select your partners) How do you select your partners for your logistics chain? Do you network with SMEs? How the relationship with large 3PL such as FedEx, DHL and UPS will affect the performance? What you think about the role of Government would support small logistics companies? Are you outsourcing your transportation service requirements?
30
Section 3: Inventory Management How do you manage customer demand with your inventory? What inventory model you use? (For example, JIT) How do you manage your warehouse storage space? How do you deal with the delays in delivery or damages, etc? What type of information system for inventory management you have? Do you have web-based information system for inventory control? How do you management your inventory using ABC classification? Section 4: Information Technology What types of IT systems you use? (Applications?) To what extend you use IT in your operations? What are the different of IT systems? What are the advantages by implementing IT (including Web-based) in your logistics operations? Do you have global positioning system? Do you use any standard ERP system in your logistics operations? What is your future plan about e-logistics? Any comments on e-Logistics?